Blue Coat Systems (BCSI)

The preparation of consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United
States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the dates of the consolidated financial statements, and the reported
amounts of net revenue and expenses during the reporting periods. Actual results may differ from these estimates, and such differences could be material to our consolidated financial condition and results of operations.

Use of Estimates

STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%">The preparation of consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the UnitedStates requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the dates of the consolidated financial statements, and the reportedamounts of net revenue and expenses during the reporting periods. Actual results may differ from these estimates, and such differences could be material to our consolidated financial condition and results of operations.

STYLE="margin-top:18px;margin-bottom:0px">Revenue Recognition

Our products include stand-alonesoftware and software that is essential to the functionality of our appliances. Additionally, we provide unspecified software upgrades through maintenance contracts for most of our products. Accordingly, we account for revenue in accordance withStatement of Position No. 97-2, Software Revenue Recognition, (SOP 97-2) and all related interpretations. We recognize revenue when all of the following criteria are met: persuasive evidence of an arrangement exists; deliveryor performance has occurred; the sales price is fixed or determinable; and collection is probable.

Delivery or performance has occurred. We use shipping and related documents, or written evidence ofcustomer acceptance, when applicable, to verify delivery or performance. Most of our sales are made through distributors under agreements that, in most cases, allow for stock rotation rights. Net revenue and the related cost of net revenue resultingfrom shipments of products to distributors are deferred until the distributors report that our products have been sold to a customer. Product revenue in China is deferred until the customer registers its purchase of the proxy appliance.

For direct sales to end-users and value-added resellers, we recognize product revenue upon transfer of title and risk of loss, which generally is uponshipment. We do not accept orders from value-added resellers when we are aware that the value-added reseller does not have an order from an end user customer. We generally do not have significant obligations for future performance, such as rights ofreturn or pricing credits, associated with sales to end users and value-added resellers.

The sales price is fixed or determinable.We assess whether the sales price is fixed or determinable based on payment terms and whether the sales price is subject to refund or adjustment.

SIZE="2">Collection is probable. We assess probability of collection on a customer-by-customer basis. We subject our customers to a credit review process that evaluates their financial condition and ability to pay for our products andservices. If we conclude that collection is not probable based upon our initial review, we do not recognize revenue until cash is received.

SIZE="2">For products in an arrangement that includes multiple elements, such as appliances, maintenance or software, we use the residual method to recognize revenue for the delivered elements. Under the residual method, the amount of revenueallocated to delivered elements equals the total arrangement consideration less the aggregate fair value of any undelivered elements, provided that vendor specific objective evidence (VSOE) of fair value exists for all undeliveredelements. VSOE of fair value is based on the price charged when the element is sold separately. We analyze our stand alone maintenance renewals by sales channel and service offering (strata). We determine the VSOE of fair value for maintenance byanalyzing our stand alone maintenance renewals and noting that a substantial majority of transactions fall within a narrow range for each stratum. In limited cases, VSOE of fair value has been based on management determined prices. If evidence ofthe fair value of one or more undelivered elements does not exist, all revenue is generally deferred and recognized at the earlier of delivery of those elements or establishment of fair value for the remaining undelivered elements. When VSOE of fairvalue cannot be determined for any undelivered maintenance, subscription or service elements, revenue for the entire arrangement is recognized ratably over the maintenance, subscription or service period.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">Maintenance and subscription revenue is initially deferred and recognized ratably over the life of the contract, with the related expenses recognized asincurred. Maintenance and subscription contracts usually have a term of one to three years. Unearned maintenance and subscription revenue is included in deferred revenue.

FACE="Times New Roman" SIZE="2">Shipping Costs

When we bill customers for shipping, we record shipping costs in both net revenue andcost of net revenue. If we do not charge customers for shipping, the costs incurred for shipping are reflected in cost of net revenue.

The preparation of consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United
States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the dates of the condensed consolidated financial statements, and the
reported amounts of net revenue and expenses during the reporting periods. Actual results may differ from these estimates, and such differences could be material to our condensed consolidated financial condition and results of operations.

The preparation of consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United
States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the dates of the condensed consolidated financial statements, and the
reported amounts of net revenue and expenses during the reporting periods. Actual results may differ from these estimates, and such differences could be material to our condensed consolidated financial condition and results of operations.

The preparation of consolidated
financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities, at the dates of the condensed consolidated financial statements, and the reported amounts of net revenue and expenses during the reporting periods. Actual results may differ from these estimates, and
such differences could be material to our condensed consolidated financial condition and results of operations.

The preparation of consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United
States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the dates of the consolidated financial statements, and the reported
amounts of net revenue and expenses during the reporting periods. Actual results may differ from these estimates, and such differences could be material to our consolidated financial condition and results of operations.

STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%">The preparation of consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the UnitedStates requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the dates of the consolidated financial statements, and the reportedamounts of net revenue and expenses during the reporting periods. Actual results may differ from these estimates, and such differences could be material to our consolidated financial condition and results of operations.

The preparation of condensed consolidated financial statements and related disclosures in conformity with
accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the dates of the
condensed consolidated financial statements, and the reported amounts of net revenue and expenses during the reporting periods. Actual results may differ from these estimates, and such differences could be material to our condensed consolidated
financial condition and results of operations.

The preparation of condensed consolidated financial statements and related disclosures in conformity with
accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the dates of the
condensed consolidated financial statements, and the reported amounts of net revenue and expenses during the reporting periods. Actual results may differ from these estimates, and such differences could be material to our condensed consolidated
financial condition and results of operations.

The preparation of condensed
consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities, and disclosure of contingent assets and liabilities, at the dates of the condensed consolidated financial statements, and the reported amounts of net revenue and expenses during the reporting periods. Actual results may differ from
these estimates, and such differences could be material to our condensed consolidated financial condition and results of operations.

The preparation of consolidated
financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities, at the dates of the consolidated financial statements, and the reported amounts of net revenue and expenses during the reporting periods. Actual results may differ from these estimates, and such
differences could be material to the Companys consolidated financial condition and results of operations.

The preparation of condensed
consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities, and disclosure of contingent assets and liabilities, at the dates of the condensed consolidated financial statements, and the reported amounts of net revenue and expenses during the reporting periods. Actual results may differ from
these estimates, and such differences could be material to the Companys consolidated financial condition and results of operations. Our critical accounting estimates include (i) Revenue Recognition and Related Receivable Allowances,
(ii) Inventories, (iii) Guarantees, Indemnifications and Warranty Obligations, (iv) Valuation of Goodwill, (v) Valuation of Long-Lived and Identifiable Intangible Assets, (vi) Restructuring Liabilities, (vii) Income
Taxes, (viii) Contingencies, and (ix) Stock-Based Compensation (x) Impact of judgment and Interpretations on Restatement Amounts and (xi) Payroll and withholding Taxes, Penalties and Interest Related to the Restatement.

The preparation of condensed consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the dates of the condensed consolidated financial statements, and the reported amounts of net revenue and expenses during
the reporting periods. Actual results may differ from these estimates, and such differences could be material to the Companys consolidated financial condition and results of operations. Our critical accounting estimates include
(i) Revenue Recognition and Related Receivable Allowances, (ii) Inventories, (iii) Guarantees, Indemnifications and Warranty Obligations, (iv) Valuation of Goodwill, (v) Valuation of Long-Lived and Identifiable Intangible
Assets, (vi) Restructuring Liabilities, (vii) Income Taxes, (viii) Contingencies, and (ix) Stock-Based Compensation (x) Impact of judgment and Interpretations on Restatement Amounts and (xi) Payroll and withholding
Taxes, Penalties and Interest Related to the Restatement .

The
preparation of consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, and disclosure of contingent assets and liabilities, at the dates of the consolidated financial statements, and the reported amounts of net revenue and expenses during the reporting periods. Actual results may differ from
these estimates, and such differences could be material to the Companys consolidated financial condition and results of operations. Our critical accounting estimates include (i) Revenue Recognition and Related Receivable Allowances,
(ii) Inventories, (iii) Guarantees, Indemnifications and Warranty Obligations, (iv) Valuation of Goodwill, (v) Valuation of Long-Lived and Identifiable Intangible Assets, (vi) Restructuring Liabilities, (vii) Income
Taxes, (viii) Contingencies, (ix) Stock-Based Compensation, (x) Impact of Judgments and Interpretation on Restatement Amounts and (xi) Payroll and Withholding Taxes, Penalties and Interest Related to the Restatement.

The preparation of condensed consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the dates of the condensed consolidated financial statements, and the reported amounts of net revenue and expenses during
the reporting periods. Actual results may differ from these estimates, and such differences could be material to the Companys consolidated financial condition and results of operations. Our critical accounting estimates include
(i) Revenue Recognition and Related Receivable Allowances, (ii) Inventories, (iii) Guarantees, Indemnifications and Warranty Obligations, (iv) Valuation of Goodwill, (v) Valuation of Long-Lived and Identifiable Intangible
Assets, (vi) Restructuring Liabilities, (vii) Income Taxes, (viii) Contingencies, and (ix) Stock-Based Compensation (x) Impact of judgment and Interpretations on Restatement Amounts and (xi) Payroll and withholding
Taxes, Penalties and Interest Related to the Restatement .

The Companys financial statements have been prepared in accordance with accounting principles
generally accepted in the United States. The preparation of these financial statements requires that the Company make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to revenue recognition, provision for doubtful accounts, fair value of investments, useful lives of property and equipment, income
taxes, and contingencies and litigation, among others. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for
making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from the estimates made by management with respect to these items and other items that require
managements estimates.

The preparation of condensed consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the dates of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during
the reporting periods. Actual results may differ from these estimates, and such differences could be material to the Companys consolidated financial position and results of operations. The Companys critical accounting estimates include
(i) Revenue Recognition and Related Receivable Allowances, (ii) Inventories, (iii) Guarantees and Warranty Obligations, (iv) Valuation of Long-Lived and Identifiable Intangible Assets, (v) Restructuring Liabilities,
(vi) Valuation of Goodwill, (vii) Income Taxes, (viii) Contingencies, and (ix) Stock-Based Compensation.

The preparation of condensed consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the dates of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results may differ from these estimates, and such differences could be material to the Companys consolidated financial position and results of operations. The Companys critical accounting estimates include
(i) revenue recognition and related receivable allowances, (ii) inventories, (iii) warranty obligations, (iv) valuation of long-lived and identifiable intangible assets, (v) restructuring liabilities, (vi) valuation of
goodwill, (vii) income taxes, (viii) commitments and contingencies, and (ix) stock-based compensation.

The preparation of condensed consolidated financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, at
the dates of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results may differ from these estimates, and such differences could be material to the Companys
consolidated financial position and results of operations. The Companys critical accounting estimates include (i) revenue recognition and related receivable allowances, (ii) inventories, (iii) warranty obligations, (iv) valuation of long-lived
and identifiable intangible assets, (v) restructuring liabilities, (vi) valuation of goodwill, (vii) income taxes, (viii) commitments and contingencies, and (ix) stock-based compensation.

The preparation of consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires
management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, at the dates of the consolidated financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results may differ from these estimates, and such differences could be material to the Companys consolidated financial position and results of operations. The Companys critical accounting
estimates include (i) inventories, (ii) valuation of goodwill, (iii) valuation of long-lived and identifiable intangible assets, (iv) restructuring liabilities, (v) revenue recognition and related receivable allowances, (vi) warranty obligations,
(vii) income taxes, and (viii) commitments and contingencies.

The preparation of condensed consolidated financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the consolidated financial statements and
the reported amounts of revenues and expenses during the reporting periods. Actual results may differ from these estimates, and such differences could be material to the Companys condensed consolidated financial position and results of
operations. The Companys critical accounting estimates include (i) revenue recognition and related receivable allowances, (ii) guarantees and warranty reserves, (iii) inventory and related reserves, (iv) restructuring liabilities, (v)
valuation of long-lived and intangible assets, (vi) goodwill impairment, (vii) income taxes, and (viii) contingencies.

The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that affect amounts and disclosures reported in the accompanying financial statements. Actual results could differ from those estimates.